Today, of course, the first trader knows the game he’s playing, so he would never place a large order, but would place a myriad of small orders. There’s been an arms race, where those doing the hard work of research try to keep their information away from the algorithmic traders, and the algorithmic traders try to break their code. One might say it’s just a waste of resources—a fight over the rents associated with early information. But it’s worse than that. To the extent that the algorithmic traders succeed in outwitting those who do the real research, the returns to research fall; there will
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